BLACK SWANS IN BRICS ENERGY SECTORS - SPECIAL REPORT - SparkBlue
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
SPECIAL REPORT BLACK SWANS IN B R I CS E N E RGY S ECTO RS
'Remember that you are a Black Swan.'
Nassim Nicholas Taleb,
The Black Swan: The Impact of the Highly Improbable
SPECIAL REPORT BLACK SWANS IN BRICS ENERGY S ECTO RS A whitepaper that shows how young people visualise unforeseen challenges for energy sectors through analysis of the past BRICS YOUTH ENERGY AGENCY ANALYTICAL CENTRE 2021
EDITOR IN CHIEF Margarita Kuzmina ART DIRECTOR Aleksandr Kormishin OUTLOOK TEAMS University of Sao Paulo (Brazil) University of Brasilia (Brazil) EnergyC (Brazil) Gubkin RSU of Oil and Gas (Russia) Kutafin Moscow State Law University (Russia) Thapar Institute of Engineering and Technology (India) JIS College of Engineering (India) Girijananda Chowdhury Institute of Management and Technology (Guwahati, India) Indian Institute of Technology (Dhanbad, India) National Institute of Technology (Srinagar, India) University of International Business and Economics (China) University of Pretoria (South Africa) Senamile Masango Foundation (South Africa) Durban University of Technology (South Africa) University of Witwatersrand (South Africa) University of Kwazulu-Natal (South Africa) University of South Africa (South Africa) Tshwane University of Technology (South Africa) South African Radiation Protection Association (South Africa) CONTACT BRICS Youth Energy Agency Slavyanskaya Square, 2/5, 1-1, 13 109240 Moscow, Russia info@yeabrics.org DISCLAIMER: This publication reflects the views of the developers' teams but does not necessarily reflect those of individual BRICS member countries, nei- ther the BRICS Secretariat or BRICS YEA. BRICS YEA makes no warranties or representations, express or implied, as to its accuracy, currency or compre- hensiveness and assumes no liability or responsibility for any error or omission and shall not be responsible for any use of, or reliance on, the publica- tion. The BRICS Youth Energy Outlook contains forward-looking statements which involve risks and uncertainties because they relate to events, and depend on many circumstances, that will or may occur in the future. Actual outcomes may differ depending on a variety of factors and BRICS YEA disclaims any obligation to update this presentation. All material presented in figures and tables is derived from data and analysis taken from indicated in referenc- es sources. This publication and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Illustations of black swans in this publication come from FreePik.
Contents
BRAZIL . . . . . . . . . . . . . . . . . . . . . . . . 6
RUSSIA . . . . . . . . . . . . . . . . . . . . . . . . 12
INDIA . . . . . . . . . . . . . . . . . . . . . . . . . 21
CHINA . . . . . . . . . . . . . . . . . . . . . . . . . 33
SOUTH AFRICA . . . . . . . . . . . . . . . . . . . 38
BRICS YOUTH ENERGY OUTLOOK 2020
1 BRAZIL
YOUTH
PERSPECTIVE
Key findings
• The discovery of a new oil reserve on the Brazilian coast could impact the economy and delay the
growth of renewable technologies in the country such as biofuels
• The reduced demand from the domestic conventional energy market caused by effects of COVID-19
drove an increase in net exports of oil and its derivatives in the second quarter of 2020 compared to
the first quarter
• During the pandemic solar generation was the only source of the National Interconnected System
that showed growth. It increased 34.8% in June due to the entry of new plants in the system over
the last year.
• In Brazil considering the growth in the use of natural gas, there is a convenient opportunity for energy
integration between renewable and fossil sources, with positive impacts on the social, environmental
and economic areas of the country.
• The COVID-19 pandemic may be described as a Grey Swan as it brought new challenges, such as
the exposure of a series of vulnerabilities regarding social inequality and opportunities, such as the
growth of e-commerce and technological innovations.
6 Special Report: Black Swans in BRICS Energy Sectors
SPECIAL REPORT
2020) may generate a political crisis more serious
1. "BLACK SWANS" THAT HAD THE BIG- than expected, with the possible rise of tensions
GEST IMPACT and radicalism. This could impact on important
areas of investments in the energy sector, leaving
1.1. Political corruption scandals starting in
Brasil vulnerable to further Black Swan events.
2014 involving Brazil's biggest state-owned
Besides, the unstable scenario in the country has
oil producing company, Petrobras.
devalued Brazilian currency (BRL), making im-
Petrobras is the largest public company in Brazil,
portation more expensive. If there is a bigger and
with operations in more than 20 countries around
unexpected increase in the dollar exchange, it will
the world and employing by 2014 more than 60
affect the energy transition in the country, as the
thousand people. After the scandals, in 2014 alone
construction of solar power plants depends largely
Petrobras dismissed some 8 thousand employees
on imported equipment.
(around 12% of the total workforce by then) and
witnessed its market value drop significantly, from
A second wave of the pandemic could also be a
a peak of 316 billion US$ in 2008 (a reflex of Brazil's
possible Black Swan for the country. In just four
economic growth) to 44 billion US$ by the end of
months, the COVID-19 pandemic that was decreed
the same year . The impact of that "Black Swan"
by the World Health Organization on March 11 this
was hard felt and the company still did not manage
year, had a massive impact in Brazil. The country
to recover completely, which is demonstrated by
registered more than 3.2 million people infected,
the stabilization of its market value in relatively
and more than 105 thousand deaths (Coronavirus
low levels.
Brasil, August 15, 2020). Experts say that the more
liberal the restriction measures are, the higher is the
1.2 Climatic cataclysms such as unexpected
risk of this new wave. In summary, the pandemic
periods of droughts
already shows economic impacts in the country,
Given a large number of drainage basins in the
such as the drop in GDP, the devaluation of the
country, hydroelectric was a logical choice to gener-
dollar, the increase in unemployment insurance
ate energy and electricity. By 1990, hydroelectric
claims and the reduction of industrial produc-
accounted for 80% of the electricity matrix; there-
tion (Exame, 2020). These impacts may still be
fore, Brazil's electricity supply depended highly on
prolonged if the government is not active, or if the
this energy source. Towards the end of the 20th
second wave of the pandemic happens.
century, the vast urbanisation of cities - especially
the Southeast region - fostered the migration of
Another possible Black Swan would be natural
citizens from the Northeast to the largest cities in
disasters. By presenting a scenario of continental
south-Brazil. This urbanisation process generated
dimensions, Brazil is very susceptible to the occur-
a high increase in energy demand in a short period
rence of accidents of different origins, intensities
which led to draughts.
and evolutions, such as tornadoes and torrential
rains (IBGE, 2016). Depending on the scale, the
Additionally, the country went through unexpected
Brazilian energy mix and the economy can suffer
periods of droughts, which directly affected the
a negative impact. Furthermore, it can generate
production of hydroelectricity. Therefore, from
public health problems such as contamination of
the 1990s until 2002, the country suffered several
water, soil, and air, displacement of the population,
blackouts and even a period of energy rationing.
and impairment of essential public services such
After this, Brazil tried to diminish its dependence
as water supply and transportation (Ministerio
on hydroelectric, and diversify its energy and
da Saude, 2017).
electricity mix. Despite the decrease in 20% of
hydro sources (ANEEL, 2009), the country still
Besides, impacts on the general budget are pos-
faces instability in supply and prices in periods of
sible, causing a drop in revenue due to reduced
unexpected droughts, such as in 2012.
economic activity. The government may also face
increasing budgetary pressures, which may lead
2. "BLACK SWANS" IN THE NEAR FU- them to use foreign exchange reserves, thereby
TURE increasing the level of indebtedness or expanding
the money supply (Gaspodini, 2011).
On the political level, Brazil currently faces a po-
litical crisis due to the government that is politi-
The discovery of a new oil reserve on the Brazilian
cally unstable. The ongoing criticism made by the
coast, which could impact the economy and delay
Executive branch to the Legislative and Judiciary
the growth of renewable technologies in the country
branches (Gragnani, 2020), the inevitable impacts
such as biofuels. Besides, Brazil has an electrical
of the COVID-19 global crisis, and the race for
matrix primarily coming from hydroelectric plants
municipal elections at the end of 2020 (Alessi,
7
BRICS YOUTH ENERGY OUTLOOK 2020
» Aerial view of burned areas in the Amazon rainforest, near the city of Porto Velho, Rondônia state. Image by Victor Moriyama / Greenpeace.
(Almeida et. al, 2019). Thus, the country would The first measure articulated by the Brazilian gov-
be greatly impacted if there was a Black Swan in ernment addresses emergency aid, which consists of
this area, such as long droughts that would affect a financial benefit for informal workers, individual
the Brazilian reservoirs drastically. microentrepreneurs (MEI), self-employed and
unemployed individuals. The aim was to provide
3. THE MEASURES THAT ARE BEING emergency protection during the crisis (Caixa Fed-
TAKEN AT REDUCING OR PREVENTING eral, 2020). To strengthen this support mechanism,
ECONOMIC IMPACT the Federal Government used BRICS international
financial cooperation. It accessed the New Develop-
Thus, after the 2008 financial crisis, the country ment Bank (2020) emergency financial instruments
adopted two main economic policies to contain to raise 1 billion dollars, of which are destined to
its effects, which became known as the New Eco- attend the demand for social credit from 5 million
nomic Matrix: Brazilians facing vulnerability, informal work, or
unemployment.
• the first, represented by a monetary measure
marked by credit expansion by the main public The Federal Government launched a credit program
banks, as well as a reduction in interest rates; for small and medium-sized companies valued at
R$ 300 billion through the Brazilian Central Bank
• while the second measure – a fiscal one – was (BCB), which not only reduced the interest rate to
marked by fiscal exemptions for the auto- 2% per year but also eased the process of private
mobile, shipping, and oil industries, as well banks’ deposit in BCB. According to Provisional
as the maintenance of high public spending Measure 992/2020, banks and financial agencies
(Barbosa Filho, 2017). installed in the Brazilian financial system can of-
fer credit from their resources (Central Bank of
These public measures taken after the 2008 crisis Brazil, 2020).
were initially perceived as positive, as it appeared
that the country had overcome the crisis within a In the industrial sphere, the participation of the
few months. However, these initiatives only delayed National Bank for Economic and Social Develop-
the most severe impacts of this Black Swan, that oc- ment (BNDES) has become a critical factor in
curred between 2014 and 2017 and increased public maintaining large companies, as well as in creat-
expenditures (Oreiro, 2017). In order to mitigate ing demand through infrastructure projects. One
these effects, the Brazilian Parliament approved of its most promising roles was in support of the
the very unpopular Amendment to Constitution national electricity sector through the “COVID-
No. 95/2016, which limited the growth of certain account” measure – it consists in granting a loan
government expenses for twenty years, despite of R$16.1 billion to companies. Another incentive
allowing periodic reviews (Senado Notícias, 2016). mechanism is the issuance of debentures focused
8 Special Report: Black Swans in BRICS Energy Sectors
SPECIAL REPORT
on clean energy, instituted through the June 5th investments in the acquisition of equipment and
decree N.10,387, which also has BNDES as project products.
coordinator.
The Brazilian energy sector is divided into: genera-
The Federal Government does not act in line with tion, transmission and distribution. According to
State and Municipal ones in order to make joint ef- information supplied by ANEEL, the distribution
forts and formulate common strategies to overcome sector is the main revenue collector in the Brazilian
the COVID-19 pandemic. As a result, its main out- energy sector, being the gateway for resources, al-
comes are the lack of confidence, instability in the though it remains with only 18% of what it collects.
economic and financial sectors and it undermines As a result, it was considered a vulnerable sector
international coordination and cooperation in during the pandemic and it started to receive aid
developing vaccines and international assistance. through the Conta-covid program.
4. ENVIRONMENTAL PROGRAMS The main reason is that the pandemic caused a 14%
reduction in energy consumption and an increase
There are some Brazilian government programs in defaults, which reached 10%. In this context,
applied to ecological issues and reduction of the Conta-covid is a loan obtained from public and
environmental impact that contribute to minimis- private banks, led by the BNDES, in order to pre-
ing effects caused by crises in the energy sector. As serve the liquidity of companies in the sector and
an example, it is possible to mention RenovaBio, alleviate the impacts of bills paid by consumers.
which recognises the strategic role of biofuels in the The financial assistance granted by the Brazilian
Brazilian energy mix in terms of their contribution Government is R $ 14.8 billion and will serve around
to energy security. Besides, the program also acts 50 energy distributors.
on market analysis and prediction, and in mitigat-
ing greenhouse gases emissions in the fuel sector. 6. FINANCIAL AND SECTORAL CONSE-
QUENCES AS RESULT OF THE FALL IN
Moreover, the “Mais Luz for the Amazon” Program OIL PRICES IN 2020
(More Light for the Amazon), launched in February
2020, foresees bringing access to electricity through It is predicted that the drop in oil prices caused
renewable sources to a vast region known as ‘the by the pandemic generates a loss for the Brazilian
Legal Amazon’, offering better life quality and less economy, since Brazil exports between 600 and
environmental impact (ANP, 2020). 700 thousand barrels per day. This also implies
a drop in royalties and collections for states and
Even with all the difficulties such as scarcity of municipalities. It can also affect new oil projects
resources, political instability, and low economic and new exploration auctions.
growth the national economic recovery must fol-
low the global trend of investing in programs and Regarding the sectoral consequences, in the primary
policies with little socio-environmental impact. sector, low oil prices may hinder production activi-
ties in some assets. In the secondary sector, on the
5. THE MOST VULNERABLE AREAS OF other hand, with the opening of the market and
ENERGY MARKETS access to import infrastructure, liquefied natural
gas (LNG) can establish itself as a safe and inex-
In times of unexpected crises, countries must pensive opportunity for energy, which is necessary
choose priority sectors to invest and assist in re- for economic growth’s resumption. Even with the
covery. If there is a shortage of financial resources, fall in oil prices and its derivatives, the recovery
increased by the fall in tax collection, some areas and stabilisation of the market should follow the
end up being harmed. Health and social assis- trend of higher investments in renewable energies,
tance usually require immediate interventions such as wind, solar and biomass. In the Brazilian
resulting in reduced support for other sectors such case, considering the growth in the use of natural
as education, research and development. Brazil gas, there is a convenient opportunity for energy
has suffered cuts in funding in these sectors in integration between renewable and fossil sources,
recent years, which reduces the country's capac- with positive impacts for the social, environmental
ity to develop new technologies and improve the and economic areas of the country.
training of technical labour. Consequently, these
cuts in technology affect the entire supply chain
of products and services for the energy markets.
Research centres with projects in operation had to
reduce the number of researchers and postpone
9BRICS YOUTH ENERGY OUTLOOK 2020
innovations (Fonseca, 2020), for Brazil. Lastly, in
7. COVID-19: A BLACK OR A WHITE Grey Swan events, after the fact, shifts focus to er-
SWAN? rors in judgment (Sikich, 2010). The emergence of
new diseases, including COVID-19, has been linked
According to Taleb (2007), a Black Swan is an event
with the increase of pollution and environmental
with the following attributes: (i) it is an outlier,
disasters, which could lead to the reflection on
unpredictable; (ii) it carries severe impact and
how humankind is potentially harming natural
widespread consequences; and (iii) after its occur-
habitats, leading to faster evolutionary processes
rence, people will rationalize the event, making it
and the diversification of diseases (United Nations
explainable and predictable. Analyzing the pandemic
Environment Programme [UNEP], 2020). Thus, it
in Brazil, it is possible to affirm that COVID-19 does
can be concluded that COVID-19 could represent a
carry major impacts in the country. For example,
Grey Swan event.
according to the International Monetary Fund [IMF]
(2020), Brazil’s GDP will have negative growth of
8. THE INFLUENCE OF THE PANDEMIC
9,1% in 2020, while the previous predictions claimed
ON THE ENERGY MARKET
that the country would have a positive growth of
2,2% (Agência Brasil, 2019).
The current COVID-19 pandemic is affecting the
energy market globally, thus impacting this sec-
On the other hand, a White Swan event can be
tor of the economy and generating consequences
considered as a predictable and preventable event,
throughout the entire production chain (IEA, 2020).
in which data and information lead governments to
conclude its certain occurrence in the future (Lus-
First, the political and economic spheres are facing
tenberger, 2020). According to Norman, Bar-Yam
an emergency since March 20th. On the macro-level,
& Taleb (2020), governments should not classify
the Senate approved the “state of public calamity”
COVID-19 as a Black Swan as a form to justify their
in its first remote session as a measure to stem the
inefficiency in dealing with this health crisis, since
spread of coronavirus (Baptista, 2020). Regarding
the event would be a White Swan. Indeed, research-
the energy consumption of industries and com-
ers pointed out about its possibility. However, a
merce, there is a reduction of nearly 20% between
White Swan event is also characterized by having
March and February according to the Brazilian
its impacts easily estimated (Sikich, 2010), and,
Chamber of Electric Energy (Feil, 2020). On the
as the reality shows, COVID-19’s impacts are still
micro-level, it is widely believed that residential
unclear for the world, including Brazil.
consumption grew due to COVID-19, however, data
is still limited (Feil, 2020).
Thus, it is noticeable that Black Swan and White
Swan definitions cannot fully explain COVID-19.
Secondly, technological and environmental fields
Perhaps, it would be interesting to interpret the
are still uncertain. On the micro-level, the pandemic
pandemic through a different lens, which could be
can potentially decrease greenhouse gas emissions
offered by the term Grey Swan. According to Liberto
in Brazil, especially in the energy and industry sec-
(2019), Grey Swan is an event in which people are
tors (Greenhouse Gas Emissions Estimation System
aware of its presence, but do not take the probability
[SEEG], 2020). On the macro-level, there is a sig-
of occurrence seriously enough, even if it could end
nificant tendency that the COVID-19 health crisis
up having severe consequences. This can be seen in
delays the development of clean energy technologies
Brazil since health professionals warned about its
and equipment (Fernandes, 2020).
effects in the past (Caputo, 2016; Alves, 2019) and
the government acknowledged the possibility for
In summary, data regarding the effects of the pan-
it to happen, especially when the former Minister
demic on the political, economic, technological,
of Health, Arthur Chioro, alerted in 2015 about
and environmental spheres of the Brazilian energy
the high probability of a dengue and zika virus
market is still limited (Feil, 2020). On the political
epidemics (Amaral, 2015). However, due to general
and economic level of analysis, there will be less
disbelief, no further investments were made in the
revenue from taxes for the Government, which
health sector for its prevention.
will likely affect the federal, state, and municipal
resources. At the same time the tax collection de-
Moreover, Grey Swan events can be positive or
creased, the expenditures on aid-packages for the
negative and significantly alter the way the world
economy during the pandemics will both affect the
operates (Liberto, 2019), and COVID-19 brought
country’s reserves. In the technological and envi-
indeed new challenges, such as the exposure of a
ronmental fields, the energy sector will decrease
series of vulnerabilities regarding social inequal-
its GHG emission in Brazil and the technological
ity (Informe Ensp, 2020), and opportunities, such
sector development will slow down.
as the growth of e-commerce and technological
10 Special Report: Black Swans in BRICS Energy SectorsSPECIAL REPORT
9. THE INFLUENCE OF THE PANDEMIC ON CON-
VENTIONAL AND NON-CONVENTIONAL ENERGY
MARKETS
The COVID-19 pandemic surely influenced both conventional
and non-conventional energy markets in Brazil.
In the conventional energy market, the Brazilian state-owned
oil company Petrobras had a 3% drop in its oil production in
the second quarter of 2020, compared to the first quarter with
a production of an average of 2.147 million barrels of oil per
day. This decrease is due to the impacts of the pandemic on
the industry, with a sharp drop in the value of Brent, a strong
decrease in demand and a surplus of products in the market.
Despite this, the negative result is considered minimal since
On the micro-level, the
the average production of oil and natural gas was 6.4% higher
pandemic can potentially
than that recorded in the same period in 2019. Moreover, ac-
decrease greenhouse gas
cording to the Petrobras 2020 second quarter’s report, the
emissions in Brazil, especially
reduced demand from the domestic market caused by effects
in the energy and industry
of COVID-19 drove an increase in net exports of oil and its
sectors (Greenhouse Gas
derivatives in the second quarter of 2020 compared to the first
Emissions Estimation System
quarter. In addition, there was a strong focus on exporting such
[SEEG], 2020). On the macro-
products, due to a decreased demand in the domestic market.
level, there is a significant
tendency that the COVID-19
Concerning the non-conventional energy market, solar gen-
health crisis delays the
eration increased 34.8% in June. It was the only source of the
development of clean energy
National Interconnected System (SIN) to show growth com-
technologies and equipment
pared to the same period in 2019. The increase was driven by
(Fernandes, 2020).
the entry of new plants in the system over the last year, which
increased the generation from 508 average megawatts (MW)
to 684 average MW. However, other sources declined. The
wind farms had the biggest drop with a decrease of 7%. This is
partly explained by the advance of cold fronts from the South
to the Southeast regions of Brazil in the first half of June 2020.
Moreover, Hydroelectric decreased its energy generation in
4.6% and thermoelectric had 2.7% of reduction in its volumes
of energy generated.
Considering the impact on energy consumption and other related
factors, both non-conventional and conventional markets were
impacted in different ways but with moderate effects derived
from COVID-19. The real impact in both markets will be fully
known only in the next few months as the pandemic effects
will cool down. However, it is possible to state that the effects
on these markets were not catastrophic so far.
11BRICS YOUTH ENERGY OUTLOOK 2020
2 RUSSIA
YOUTH
PERSPECTIVE
Key findings
• A reduction in production and a drop in oil prices in 2020 will inevitably lead to a reduction in budgets
and a revision of investment programs. Small and medium-sized companies, as well as companies
with a high debt burden, were in the worst position, since they have the lowest margin of safety.
These two processes will also affect the demand for electricity.
• The situation caused by COVID-19 had the greatest economic impact. Due to this problem, Russia
found itself in a recession, and in order to get out of it and revive economic activity, the measures
are being taken, the effectiveness of which is still difficult to assess.
• Each energy sector was also influenced by a series of unpredictable and destructive events that had a
negative impact on the sector. One of the most vulnerable energy sectors was the oil and gas industry.
• COVID-19 is determined not only as a black swan, but also as a white one event, that is not an anomaly
for all of humanity. Thanks to modern technology, almost the whole world followed the development
of the pandemic in real time. People knew little about this threat, but most governments acted too
slowly to prevent the spread of the virus around the world.
12 Special Report: Black Swans in BRICS Energy SectorsSPECIAL REPORT
depreciated, the standard of living fell, the number
1. INTRODUCTION of those receiving unemployment benefits doubled.
In 2007, the American writer and Ph.D. Nassim
2.2 The beginning of the 2008 global financial
Nicholas Taleb in his book «Black Swan. Under the
crisis
Sign of Unpredictability» he introduced the term
The collapse of the world's largest economy - the US
«The Black Swan» (TBS). Events of this type are
economy - could not but affect oil prices. In June
characterized by three properties: rarity, extreme
2008, the price of Brent crude oil was $ 164.92 per
impact, and retrospective (though not prospective)
barrel, and in January 2009 it was already $ 50.89.
predictability. As the author of the theory notes,
It was only in June 2009 that oil prices began to
«these rare Black Swans explain almost everything
rise again.
that happens in the world ...».
According to the World Bank, the 2008 crisis in
Changes in the energy markets in different coun-
Russia began with the private sector. It was pro-
tries, including the Russian Federation, were no
voked by his "excessive borrowing in the midst
exceptions. From December 1991 to August 2020,
of a deep triple shock: on the part of the terms
there were multiple changes in the markets for oil,
of trade, capital outflow and tightening of the
gas, coal, etc. The most important for us, citizens
terms of external borrowing". The capitalization
of the Russian Federation, is the oil and gas mar-
of Russian companies decreased in September-
ket, which provides about 1/3 of the income to the
November 2008 by three quarters; gold and foreign
country's today. It is the oil and gas complex that
exchange reserves fell by 25%. The financial crisis
is mostly affected by the pressure of the so-called
lowered public confidence in banks and led to an
"black swans". This is due to the fact that in the
outflow of deposits. As a result of the financial
international energy arena there is fierce competi-
crisis, government projects in infrastructure and
tion between the leading countries for the export
construction have been curtailed. According to the
of gas and oil.
data released on January 23, 2009 by Rosstat, in
December 2008 the decline in industrial production
After analyzing the Russian economy in various
in Russia reached 10.3% compared to December
aspects, the Russian teams have identified several
2007, which was the deepest decline in production
black swans that have most significantly influenced
over the past decade.
their country.
By the end of 2008, the world entered a global reces-
2. BLACK SWANS THAT HAD THE BIG- sion. The recovery process after the 2008 collapse
GEST IMPACT is still under way. For Russia, the recession process
is also aggravated by the economic sanctions of the
1.2 1998 financial crisis
US, EU and their partners.
The economic situation in Russia in the 1990s was
influenced by many factors. The reasons for the
2.3. Sanctions as complicating Russia's eco-
onset of the 1998 crisis include: the illiterate bud-
nomic recovery after the 2008 crisis
getary and financial policy of the State Duma and
In mid-March 2014, the US and EU countries in-
President B.N. Yeltsin, the Asian crisis of 1997-1998.
troduced the first package of sanctions. One of the
and the drop in oil prices since the end of the Gulf
goals of the introduction of these restrictions was
War. After the end of Operation Desert Storm by
to reduce the volume of Russian oil production by
the United States and its allies, as a result of which
stopping the supply of specialized equipment and
Iraqi troops were forced to leave Kuwait, by Febru-
technologies needed to develop hard-to-recover
ary 1991 the price of Brent crude oil fell to $ 36.63
reserves.
per barrel. In December 1998, the price of Brent
oil fell to a record $ 17.64.
After 6 years of the sanctions regime, it can be noted
that this goal has not been achieved. From March
As a result, on August 17, 1998, a technical default
2014 to July 2020, oil production in Russia grew
was declared on the main types of government debt.
by 7.16% over the entire period, while natural gas
The Russian economy received a heavy blow, as a
production increased by 6.85% from March 2014 to
result of which the Russian ruble devalued several
February 2016. However, can the sanctions against
times. In less than six months, the ruble exchange
Russia be considered events from the category of
rate fell 3.5 times. The confidence of the popula-
black swans?
tion and foreign investors in Russian banks and
the state, as well as in the national currency, was
The imposition of sanctions was expected, at least
undermined. The depositors of bankrupt banks lost
due to the fact that since the early 1990s sanctions
their deposits, the ruble savings of the population
13BRICS YOUTH ENERGY OUTLOOK 2020
» A shipment of Russia’s Sputnik V Covid-19 vaccine arrives in Tunisia. Over the past four months, about 1.25m Russian-made
doses have gone to export markets © Fethi Belaid/AFP/Getty Images
have become one of the main weapons of economic may unexpectedly cause inflation for Russia and
wars in the international arena. Therefore, one a new tendency for population incomes to fall.
team considers that the anti-Russian should be
seen as complicating Russia’s economic recovery 3.2. The COVID-19 pandemic
after the 2008 crisis. However, the ongoing coronavirus pandemic could
have a negative impact on the Russian power indus-
Other team is sure that the main instrument of try over time. There is a high risk of a sharp decline
influence at the political level and the first “black in revenue due to an increase in non-payments due
swan” are sanctions. Currently, the sanction pres- to a drop in income from businesses and households.
sure is primarily seen from the United States, since At the same time, the state limits the possibility
shale oil and gas are key competitors of domestic of applying sanctions against defaulters: Decree
raw materials. The result of the sanctions is primar- of the Government of the Russian Federation No.
ily a decrease in the share of Russian oil and gas 424 dated 04/02/2020, part of the consumers of
exports, as well as a slowdown in the moderniza- utilities (including electricity and heat) from fines
tion of production and the industry as a whole. for late payments until the end of 2020.
2.4. The weakening of the national currency 3.3. Fuel and energy complex
The next important “black swan” is the weaken- A reduction in production and a drop in oil prices in
ing of the national currency. The most significant 2020 will inevitably lead to a reduction in budgets
fall over the past 10 years is the case, which was and a revision of investment programs (geological
nicknamed “Black Tuesday”, this happened on exploration, a reduction in orders for related indus-
December 16, 2014. The value of the ruble fell to tries, etc.). Small and medium-sized companies, as
80 rubles for 1 dollar, which entailed a decrease in well as companies with a high debt burden, were
the value of shares of Russian companies by about in the worst position, since they have the lowest
30%, which also significantly affected energy sec- margin of safety. These two processes will also
tor. Experts note that this collapse contributed to affect the demand for electricity. For example, a
the formation of a new economic and monetary reduction in oil production will lead to a decrease
crisis in Russia. in electricity demand in some Russian regions.
3. "BLACK SWANS" IN THE NEAR FU- Increased competition in international markets
TURE could also have a negative impact on the Russian
oil industry. According to Skolkovo experts, in this
3.1. The dynamics of world oil prices scenario, oil exports from Russia could decrease
In the near future, the black swan for our country by 3 million barrels per day. In the most optimistic
will still be the dynamics of world oil prices, which scenario, the total revenues from the reduction in
14 Special Report: Black Swans in BRICS Energy SectorsSPECIAL REPORT
» Figure 1. Dynamics of prices for futures per barrel of Brent crude oil 2019-2020.
crude oil exports compared to 2019 will amount to and there are no results. However, the state cannot
$ 75 billion (2.5 times less). always cope with the “black swans” independently.
3.4. Some others 4.2.1. The economic impact of a fall in oil
In addition, one should not forget about such things prices
as trade wars, mutual sanctions, and geopolitical The economic impact of a fall in oil prices, mainly
risks, which are partly uncontrollable. caused by a shock in demand because of the CO-
VID-19 pandemic, was only minimized due to
4. THE MEASURES THAT ARE BEING joint actions to reduce oil production by OPEC
TAKEN AT REDUCING OR PREVENTING + member countries. In mid-March, the price of
ECONOMIC IMPACT Brent crude oil was below 25$ for the first time since
May 12, 2003, and now it is above the level of 40$,
4.1. Description which is an indicator of the good effectiveness of
The situation caused by COVID-19 had the greatest the measures taken by OPEC + (Fig . 1).
economic impact. Because of this problem, Russia
found itself in a recession, and in order to get out 5. ENVIRONMENTAL PROGRAMS
of it and revive economic activity, the following
measures are being taken: introduction of a de- 5.1. The state program "Environmental Protec-
lay in paying rent payments for a period of three tion"
months for small and medium-sized enterprises; It should be said that one of the main environmental
zeroing of import duties and expansion of the programs that our country is developing to protect
practice of using the “green corridor” for socially the environment not only during shocks, but also
significant goods by customs; providing banks in general, is the state program “Environmental
with the opportunity to credit enterprises in the Protection”, for which unprecedented budget funds
field of transport without worsening assessments are allocated in 2020 – 81,38 billion rubles, in 2021
of their financial situation; cancellation of penal- -93,62 billion rubles, in 2022 – 103,43 billion rubles.
ties for suppliers for the failure of state contracts Thus, government spending on the environment
due to coronavirus. is less than 0,1% of GDP, but every year there is
an increase in environmental costs, including for
4.2. The value of efficiency the elimination of unplanned accidents.
It is difficult to evaluate the effectiveness of these
measures, as they are being introduced right now, 5.2. Federal laws of environmental protection
15BRICS YOUTH ENERGY OUTLOOK 2020
» Figure 2. The dynamics of gas and coal production in Russia in 2019-2020.
There are also federal laws to ability of financial and resource
5.4.1. Effects of the spill of
ensure control of oil and gas reserves for use in emergency
diesel fuel at the Norilsk-
companies in the field of en- situations. According to one of
Taimyr Energy Company
vironmental protection: Fed- the teams, it is not correct to call
One of the largest accidents in
eral Law “On Environmental responding to problems as they
recent years is the spill of diesel
Protection”, Federal Law “On arise as a thoughtful strategy
fuel because of depressurization
Environmental Expertise”. to minimize economic damage
of the tank at the Norilsk-Taimyr
from black swans.
Energy Company. This forced
5.3. The national project
the Government, including
"Ecology" 5.6. Some disadvantages
the president, to urgently sign
A key state initiative is also the Solving these problems by pri-
a new law on the elimination
national project “Ecology”, vate individuals is simply impos-
of oil and oil products spills.
which includes simultaneous sible. However, in the Russian
It obliges companies engaged
interaction on many parameters, Federation, there are no pro-
in the extraction, storage and
which should create a unified grams for the transition to green
transportation of petroleum
system of environmental su- energy, there are no progressive
products to have a reserve ac-
pervision and create a single programs to reduce emissions
count, a bank guarantee or oil
effective system of preventive and pollution of nature or air.
spill insurance.
measures to prevent environ- There is also no system of waste
mental disasters. processing plants. It is safe to
5.5. Emergency anti-crisis
say that Russia is currently un-
measures
5.4. The value of efficiency able to cope with environmental
At the moment, the Russian bud-
But, despite all the state efforts risks due to fluctuations in global
get and the budgets of domes-
aimed at preventing “black markets.
tic companies are not protected
swans” in the environment,
from the negative impact of un-
accidents occur quite often, as 6. THE MOST VULNER-
foreseen events. In the event of
a result of partially inefficient ABLE AREAS OF ENERGY
such a situation, the Govern-
spending, inefficient environ- MARKETS
ment urgently develops and
mental monitoring, which is
applies emergency anti-crisis
fixed at the state level, shows 6.1. Oil and gas industry
measures. Large companies do
its inefficiency in terms of taking Currently, the energy market
the same. The support of finan-
preventive measures to exclude is most represented by six sec-
cial well-being in this case is the
incidents. tors, such as oil, gas, natural gas,
wealth of resources, the avail-
hydropower, coal, renewable
16 Special Report: Black Swans in BRICS Energy SectorsSPECIAL REPORT
» The energy industry and foreign investors demanded huge tax breaks to launch production facilities in Russia’s arctic.
© gazprom-neft.ru
energy sources. Each energy sector was influenced and India - are unlikely to be able to provide ad-
by a series of unpredictable and destructive events ditional demand for Russian oil this year.
that had a negative impact on the sector.
7. THE FALL IN OIL PRICES IN 2020 THE
Russia is one of the countries that are more prone FALL IN OIL PRICES AS THE MOST SIG-
to such events and their consequences, and as a NIFICANT SHOCK
result is in the zone of economic risk.
7.1. A temporary reduction in world tourism
One of the most vulnerable energy sectors is the In 2020, the Russian economy will not so much
oil and gas industry, since a significant part of suffer from a drop in oil prices, as it will feel a
the country’s consolidated budget is generated slowdown in the economies of its trading partner
by hydrocarbon sales revenues. The increase in countries and a temporary reduction in world
demand and energy prices and, as a result, the tourism. Nowadays, tourist trips, related services
forced reduction in production, and the suspension and consumer goods account for 6-8% of global
of plants can be called a series of events that are GDP. Their reduction even by 25-30% is a shock
uncontrollable and unpredictable. This is clearly of the order of 1,5-2 percentage points globally on
visible on the graph of coal and natural gas produc- the production of goods and services.
tion, the level of which in 2020 is below the same
period in 2019 by 5-6% (Figure 2). 7.2. Decrease in export volumes
A global shock of this magnitude could poten-
Based on the above data, it can be stated that the tially reduce the physical volume of exports from
energy markets in Russia are in a very difficult Russia by 3-7%, “which in turn will lead to (and
regressive position. already leads to) a shock in the exchange rate and
the work of the traditional mechanism in the form
The fall in oil prices is the most significant shock of a reduction in imports of consumer and invest-
in its effect for domestic energy and the country’s ment goods, “ said the deputy ACRA sovereign
economy due to its dependence on hydrocarbon rating and macroeconomic analysis group director
exports. The main blow was dealt by an unprec- Dmitry Kulikov.
edented drop in demand - by 30% in April and
almost 10% on average for the year (decline by 9,3 7.3. Drop in the price of Urals
million barrels per day, according to estimates of the Russian manufacturers are quite competitive in
International Energy Agency). At the same time, the world market, but an aggressive price war so
the main drivers of global consumption - China far leads to a drop in the price of Urals to a level at
which budget revenues are practically zeroed out,
17BRICS YOUTH ENERGY OUTLOOK 2020
new projects become unprofitable, and existing effectively you should kill it in the egg. If you can
ones will work on the verge of profitability. The and act very quickly ... So, it was not a black swan.
fall in prices also affected the quotes of Russian It was a white swan».
oil companies, which also declined.
Events like «white or gray swan» are inevitable,
7.4. Drastic reduction in export earnings, com- but they are not an anomaly for all of humanity.
pany revenue and budget revenues Thanks to modern technology, almost the whole
For Russia, a decline in energy markets means a world followed the development of the pandemic
drastic reduction in export earnings, company in real time. People knew little about this threat,
revenue, and budget revenues. The calculations but most governments acted too slowly to prevent
show that even in the most optimistic scenario, oil the spread of the virus around the world.
export revenues will decrease by 2.5 times compared
with the pre-crisis level. It is also possible a more Moreover, in the past, the world has already en-
gloomy development of events with a fall in budget countered similar phenomena. Numerous cholera
revenues by 4-10 times in 2020. epidemics, the Spanish flu pandemic (1918-1921),
the Asian flu (1957) and the Hong Kong flu (1968),
7.5. Pessimistic scenario the swine flu pandemic (2009-2010), etc. Based
In a pessimistic scenario (a decline in global demand on the experience gained, scientists have devel-
of 11 million barrels per day and non-compliance oped several models, predicting the development
with production quotas), the Russian oil industry of epidemics. In the late 1920s, SIR (susceptible,
may be on the verge of breaking even for existing infected and recovered) was developed. Today,
projects and practically deprive the budget of there is a more advanced model - SIER, which also
revenues from export duties and mineral extrac- takes into account those infected with the virus in
tion taxes. the stage of the incubation period (exposed). In
accordance with this model, the rate of spread of a
8. COVID-19: A BLACK OR A WHITE pandemic depends on the value of the reproduction
SWAN? index (R), which shows how many people one sick
person will infect. Based on R (for COVID-19, it is
8.1. As a Black Swan about 3) and a number of other factors, a schedule
In 2018, WHO researchers suggested that the prob- is drawn up that allows predicting the develop-
ability of a pandemic of a certain level is one in ment of pandemics. This proves the fact that the
100, or one percent in any given year. Whereas, in development of the pandemic was not unexpected
the case of flooding when calculating for a 30-year for experts and confirms the point of view that the
period, the probability of a pandemic exceeds one coronavirus pandemic is not a black swan.
in four. The absence of a pandemic for more than
50 years means that the probability of a global 9. THE INFLUENCE OF THE PANDEMIC
outbreak is almost 40 percent. Thus, the virus can ON THE ENERGY MARKET
be defined as a black swan.
9.1. Decline in GDP
At the same time, losses from the coronavirus can Losses in oil and gas export revenues in 2020 will
be called catastrophic. In fact, we are talking about be almost equal in volume to the National Welfare
a double drop in prices and a 20-25% reduction in Fund. So finding sources of funding for incentive
the volume of Russian exports of oil, gas and coal programs will not be easy.
at the same time, which is equivalent to the loss of
60% of export revenue. For the budget, this means For FEC enterprises, everything that happens will
a sharp reduction in income (by about 30%) just mean austerity and a reduction in investment pro-
at the moment when the population and business grams, which, in turn, will inevitably affect related
most need state support. industries. According to calculations, this can lead
to an additional decrease in the country’s GDP (in
8.2. As a White Swan addition to the direct influence of coronavirus and
At the same time, another team notes that there is restrictive measures to combat it) by 5-13% in 2020,
no doubt that COVID-19 has had a serious impact depending on the scenario.
on the entire world, including the energy sector.
However, the pandemic wasn’t an unexpected The Russian Federation, as a result of the impact
event. The author of the TBS theory - Nassim of the current pandemic, is witnessing a decline
Taleb in an interview with Bloomberg said: «Of in GDP of 5.5%. In the domestic energy market,
course, it was preventable. And we have known the oil industry suffered the most losses due to the
from June 26, when we issued our warning, that strong drop in demand for oil, in particular mo-
18 Special Report: Black Swans in BRICS Energy SectorsSPECIAL REPORT
tor fuels. In the domestic market of the Russian unprofitable, and existing will work on the verge
Federation, a decrease in demand for motor fuels of profitability.
is estimated at 40%.
9.4. Coal market
9.2. Gas industry The coronavirus pandemic has affected the coal
The gas industry, compared to the oil industry, market as well. Changes in the coal industry of
has not been as badly affected by the Covid-19 the Russian Federation should be sought in for-
pandemic. Gas demand remains robust as it is eign markets. So, according to Deputy Energy
primarily used for electricity generation and do- Minister Anatoly Yanovsky, In the first quarter
mestic purposes. However, the gas market did not of 2020, compared to the same period in 2019, the
avoid a decline in prices and consumption volumes. export of Russian coal decreased by 14.3% - from
In addition to the coronavirus infection, this was 54.2 to 46.5 million tons. This is mainly due to the
facilitated by an abnormally warm winter and an decline in coal purchases by Germany, Italy and
increase in supply from producers of liquefied Poland. At the same time, supplies to the countries
associated gas. of Africa and the Middle East increased. Thus, the
export coal market will be able to compensate for
This led to a reduction in gas exports from Rus- losses due to a warm winter and coronavirus and
sia. A number of Gazprom’s major partners have by 2022 recover to 220 million tons (according to
sharply reduced purchases, for example, supplies the optimistic scenario).
to Turkey fell sevenfold. A sharp drop in prices on
the global gas market, including in Europe, forced 9.5. Renewable energy sector
Gazprom to revise its preliminary forecasts for The pandemic affected unconventional energy
2020 and reduce the cost of its goods from $ 200 sources in two ways. On the one hand, Covid-19
to $ 130-140 per 000 cubic meters. m. At the same has a particularly negative impact on the renewable
time, the Russian company is protected by long- energy sector. One of the main problems is related
term contracts, which, according to optimistic to the delivery of equipment to power plants. China,
forecasts, may allow it to maintain its positions one of the countries most affected by coronavirus,
in the European gas market (30-35%). is the world’s leading producer of many clean en-
ergy technologies, such as solar panels and wind
It also affected the production of natural gas in turbines. Since coronavirus delays deliveries from
Russia. In the first half of 2020, gas production in China, Russian companies engaged in renewable
Russia decreased by 9.7 percent compared to the energy cannot comply with the equipment instal-
same period last year. At the same time, it should lation deadlines.
be noted that the negative dynamics is largely due
to a decrease in production by Gazprom, which has The development of the renewable energy sector
a monopoly on gas exports to Europe. According may also slow down for reasons such as:
to calculations, in March 2020, Gazprom reduced
gas production by 18% year-on-year. • reduction in global energy demand;
9.3. Oil industry • the recent sharp decline in oil prices, followed
From the point of view of market competitiveness, by lower prices for other fossil fuels;
domestic producers look confident, since capital
and operating costs in the industry are not large • nowadays, there is a slowdown in the process
and are mainly denominated in rubles, which al- of international climate negotiations.
lows them to decline in the context of devaluation.
In addition, the Russian oil industry has a certain On the other hand, the crisis caused by the pan-
margin of safety due to the peculiarities of tax demic can lead to a rethinking of development in
regulation, in which the risks of low oil prices are many countries and accelerate the transition to
transferred to the budget. For the state as a whole, sustainable development, the integral elements of
oil prices budgeted for are significantly lower than which are increasing energy efficiency and switch-
other resource economies, although they signifi- ing to renewable energy sources. Also it can accel-
cantly exceed the real price level at present. erate the transition to renewable energy sources
(RES). This is due to the desire of some countries
Despite the fact that Russian producers are com- to move from the “old” economy based on fossil
petitive, an aggressive price war on the global oil fuels to a new one. Also, as noted by the Minister
market leads to a drop in the price of Urals oil of Energy of the Russian Federation Alexander
(April price: $ 8.48 / bar.) to a level at which budget Novak, technologies in the field of IT, the Internet,
revenues are almost zeroed, new projects become
19BRICS YOUTH ENERGY OUTLOOK 2020
digital and cloud solutions will rapidly develop in the near future, and this will contribute to the rapid
development of green energy and renewable energy sources.
9.6. The environment
Certainly, a pandemic will have positive environmental consequences (for example, a reduction in hydro-
carbon emissions). However, there are also hidden negative consequences, the solution of which should
take place at the state and interstate levels. These threats include:
• Possible cuts in green energy investment reported by the International Energy Agency;
• Departure of policies to reduce emissions into the background;
• Falling demand for public transport, colwing, car sharing and other attempts to replace one-time
use with reusable ones, and personal with public ones;
• Cancellation of summits and conferences on environmental issues;
• Accumulation of huge amounts of medical waste, etc.
9.7. Global energy market after the pandemic
«The global energy market will not be the same, it has already changed», said Minister of Energy of the
Russian Federation H.E. Alexander Novak at the session of the World Energy Congress (WEC), dedi-
cated to the impact of COVID-19 on the global energy market. The structure of energy consumption and
energy production will change.
In the post-crisis period, all three main technological directions of the energy transition (decarbonization,
decentralization and digitalization) will receive a new impetus and begin to develop at an accelerated
rate, which coincides with the foreign policy priorities of the leading OECD countries.
An important direction in the development of the energy sector of the future should be the creation of
a «safety cushion» against new black swans.
20 Special Report: Black Swans in BRICS Energy SectorsSPECIAL REPORT
3 INDIA
YOUTH
PERSPECTIVE
Key findings
• The COVID-19 pandemic had a deep influence on India’s energy industry. The demand for electricity
has reduced to half of its installed capacity, mainly from high-consuming industries and commercial
entrepreneurs. India has continuously witnessed a series of localized blackouts.
• Oil price fluctuations are inevitable. Some of the crucial factors contributing to significant oil price
variation include demand-supply dynamics, geo-political events, and OPEC policy interventions.
• India is diversifying its sources of crude oil imports to strengthen its energy security. The country is
looking to spread out its oil and gas terminals to its relatively calmer eastern coastline instead of the
more volatile and vulnerable western coast.
• There is major progress in India regarding sustainable development which works in attaining the
United Nations Sustainable Development Goals (SDGs), particularly SDG7 on energy. The Govern-
ment of India launches environmental programs and introduces policies that gives priority to provide
secure, affordable and sustainable energy to all the citizens.
21BRICS YOUTH ENERGY OUTLOOK 2020
1. INTRODUCTION plants to procure coal and freight. DISCOMs are
also compelled to extend the settlement period of
India is one of the fastest and largest emerging their dues to power generators by 3 months and that
market economies in the world. Since its indepen- will itself weigh heavily on the bottom lines of all
dence, it has reduced poverty, improved education power generators including RESCOs. Many of these
levels, expanded basic infrastructure capacities would see their debt mountain rising and thereby
to a great extent, along with conserving its rich affecting credit scores. With these declining credit
biodiversity and building partnerships for sus- scores, RESCOs may find it increasingly difficult
tainable development despite facing great chal- to sustain themselves. The central government has
lenges and difficulties. A number of national and announced a Rs 90,000-crore liquidity package
international “black swan” events had a range of to help sustain DISCOMs which shall take some
direct or indirect, positive, or negative impacts on time for approvals to execution. The independent
India’s overall economy and the energy sector was power regulators who own magnitude projects may
no exception. Despite the fact that India stands as surrender bank letters to DISCOMs or may ask for
the largest consumers of fossil fuels in the world, ownership or control to regulate the power supply.
India’s per capita primary energy consumption is far
below the major emitters such as the United States 2.2 Major Blackouts (2001 & 2012)
and China. The population of India is expected to i. July 30 and July 31, 2012 (620 Million People Af-
surpass China by 2022, indicating that the energy fected): One of the worst-hit blackouts occurring in
demand with the rates in climate vulnerability will two phases began with the outage of the northern grid
increase by and large. Energy is considered one of on 30th July 2012 which disconnected it from the four
the critical sectors of a country’s economy and any grids (Eastern, North Eastern, Southern and Western
disruption to this sector can wreak havoc on the grids). The next day on 31st July, after 32 hours of
country’s stability. outage another problem occurred and resulted in the
collapse of the other four grids which directly affected
2. BLACK SWANS THAT HAD THE BIG- all the 28 states and around 670 million people of
GEST IMPACT the country. As stated in Central Electricity Regula-
tory Commission reports, the newly interconnected
India’s energy industry has witnessed a couple of southern region was highly stressed during July 2012
‘Black Swans’ including Gulf War, fall of Soviet due to monsoon rains which increased the demand
Union, Bombay High oil field’s discovery, major for agriculture use in the Northern region. Thus, a
power blackouts in 2001 and 2012, oil price fluc- high flow was observed from the western region to the
tuations and most recently, COVID-19. The most northern grid which became the reason for the sudden
significant Black Swans have been listed below: failure of the northern grid and resulting blackout.
1.2 COVID-19 ii. January 2, 2001 (700 million people affected): A
The pandemic had a deep influence on India’s substation failed in Uttar Pradesh in January 2001,
energy industry. The demand for electricity has which resulted in the failure of the biggest Indian Grid
reduced to half of its installed capacity, mainly i.e., Northern Grid. Many essential services such as
from high-consuming industries and commercial hospitals, trains, major cities, etc stopped function-
entrepreneurs. India has continuously witnessed ing. Loss estimation was stated by the Confederation
a series of localized blackouts. India’s power mar- of Indian Industry to be up to 2.5 to 5 billion rupees.
ket activities are largely unbundled, based on the The southern grid, which is the second-largest grid
separation of generation, transmission and dis- was also warned post the outage. One of the reasons
tribution under the Electricity Act of 2003, with after the investigation was found to be inadequate
retail activities being carried out mostly by the transmission equipment.
Distribution sector consists of Power Distribution
Companies (DISCOMs). DISCOMs throughout the By the end of 2008, the world entered a global reces-
country have started working with 80% capacity sion. The recovery process after the 2008 collapse
hardly sustaining to pay the salaries of employees is still under way. For Russia, the recession process
while there is hardly any investment left for power
22 Special Report: Black Swans in BRICS Energy SectorsYou can also read
